Adams Company has two products: A and B. The annual production and sales of Product A is 2,550 un…

Adams Company has two products: A and B. The annual production and sales of Product A is 2,550 units and of Product B is 1,950 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.5 direct labor-hours per unit and Product B requires 0.8 direct labor-hours per unit. The total estimated overhead for next period is $108,200.
The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools–Activity 1, Activity 2, and General Factory–with estimated overhead costs and expected activity as follows: Activities Estimated Overhead
cost
Expected Activity Product A Product B Total   Activity 1 $33,434       1,850      1,450      3,300         Activity 2 19,043       2,550      1,050      3,600         General Factory

55,723       1,275      1,560      2,835         Total

$108,200      

(Note: The General Factory activity cost pool’s costs are allocated on the basis of direct labor-hours.)

The predetermined overhead rate under the traditional costing system is closest to:

$5.29

$38.17

$10.13

$19.66

"Is this question part of your assignment? We can help"

ORDER NOW